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How Private Creditors Fared in Emerging Debt Markets, 1970-2000

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  • Klingen, Christoph
  • Weder di Mauro, Beatrice
  • Zettelmeyer, Jeronimo

Abstract

We estimate ex post returns to emerging market debt by combining secondary-market prices with observed flows based on World Bank data. From 1970–2000, returns averaged 9% per annum, about the same as returns on a ten-year US treasury bond. This reflects the combined effect of the 1980s debt crisis and much higher returns during 1989–2000. Annual returns since 1986 have been less volatile than emerging market equity returns but more volatile than returns on US corporate or high-yield bonds. Unlike returns on these bonds, however, emerging market debt returns do not seem significantly correlated with US or world stock markets.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4374.

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Date of creation: May 2004
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Handle: RePEc:cpr:ceprdp:4374

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Keywords: crises; returns capital flows; sovereign debt;

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References

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  1. Michael Dooley & Richard D. Haas & Steven Symansky, 1993. "A Note on Burden Sharing among Creditors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 226-232, March.
  2. Edwin J. Elton, 2001. "Explaining the Rate Spread on Corporate Bonds," Journal of Finance, American Finance Association, vol. 56(1), pages 247-277, 02.
  3. William Goetzmann & Philippe Jorion, 1998. "Re-emerging Markets," Yale School of Management Working Papers ysm50, Yale School of Management, revised 01 Aug 2000.
  4. Harvey, Campbell R, 1995. "The Risk Exposure of Emerging Equity Markets," World Bank Economic Review, World Bank Group, vol. 9(1), pages 19-50, January.
  5. Rogoff, Kenneth, 1990. "Symposium on New Institutions for Developing Country Debt," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 3-6, Winter.
  6. Bulow, Jeremy & Rogoff, Kenneth, 1990. "Cleaning Up Third World Debt without Getting Taken to the Cleaners," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 31-42, Winter.
  7. G. Andrew Karolyi & Rene M. Stulz, 2002. "Are Financial Assets Priced Locally or Globally?," NBER Working Papers 8994, National Bureau of Economic Research, Inc.
  8. K. Geert Rouwenhorst, 1999. "Local Return Factors and Turnover in Emerging Stock Markets," Journal of Finance, American Finance Association, vol. 54(4), pages 1439-1464, 08.
  9. Giovanni Dell'Ariccia & Jeromin Zettelmeyer & Isabel Schnabel, 2002. "Moral Hazard and International Crisis Lending: A Test," IMF Working Papers 02/181, International Monetary Fund.
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Citations

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Cited by:
  1. Ashoka Mody, 2004. "What is an Emerging Market?," IMF Working Papers 04/177, International Monetary Fund.
  2. Adam, Klaus & Grill, Michael, 2012. "Optimal Sovereign Default," CEPR Discussion Papers 9178, C.E.P.R. Discussion Papers.
  3. Fernando Broner & Guido Lorenzoni & Sergio Schmuckler, 2006. "Why Do Emerging Economies Borrow Short Term?," 2006 Meeting Papers 841, Society for Economic Dynamics.
  4. James M. Boughton, 2005. "Does the World Need a Universal Financial Institution?," IMF Working Papers 05/116, International Monetary Fund.
  5. Jeanne, Olivier & Rancière, Romain, 2008. "The Optimal Level of International Reserves For Emerging Market Countries: A New Formula and Some Applications," CEPR Discussion Papers 6723, C.E.P.R. Discussion Papers.
  6. Juan J. Cruces & Christoph Trebesch, 2011. "Sovereign Defaults: The Price of Haircuts," CESifo Working Paper Series 3604, CESifo Group Munich.
  7. Michael Tomz & Mark L. J. Wright, 2013. "Empirical Research on Sovereign Debt and Default," NBER Working Papers 18855, National Bureau of Economic Research, Inc.
  8. Ricardo Hausmann and Federico Sturzenegger, 2006. "Global imbalances or bad accounting? The missing dark matter in the wealth of nations," Business School Working Papers globalimbal, Universidad Torcuato Di Tella.

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